Will Iran’s oil sales via stock exchange be effective?

Baku, Azerbaijan, July 12

By Leman Zeynalova - Trend:

Iran’s intention to sell its oil via the stock exchange has its own limitations, Francis Perrin, Senior Fellow at the OCP Policy Center (Rabat, Morocco), Senior Research Fellow at the French Institute for International and Strategic Affairs (IRIS, Paris), told Trend.

Earlier, Eshaq Jahangiri, Iran’s first vice-president said that the country is planning to offer its crude oil to buyers though the national stock exchange, in a move to circumvent US sanctions targeting the Iranian oil industry.

"We have friendly countries to which we sell our oil, and we’ve started negotiations with them," Jahangiri was quoted by IRNA state news agency as saying. "The private sector can openly buy oil and export it."

He said the private sector can purchase oil from the stock exchange and then export it.

"Oil exports are essential for the Iranian economy and it is thus very important for the Iranian authorities to try to reduce the impact of future US sanctions on their oil and gas sector. One of the ideas and projects which has been explored so far is the offering of crude oil through Iran's stock exchange, which would allow the private sector to buy oil and to export it. But this option has serious limitations. The goal of the Trump Administration is to reduce Iran oil exports to zero from November 2018. This objective is too ambitious to be realistic but the intent is clear: to deprive Iran from a great part of its export revenues in order to put pressure to bear on the regime. It means that the US will threaten every buyer of Iranian oil, whether this oil is sold by the National Iranian Oil Company (NIOC) or by private companies. Whether this oil comes from NIOC or from other companies does not matter at the end of the day. For Washington this is Iranian crude and it will be targeted and buyers could be sanctioned in any case," noted Perrin.

Perrin believes that the option of oil sales through the stock market is not really an efficient and effective way for Iran and for purchasers of Iranian oil to avoid US sanctions. It will not become something very significant in the near future, according to the expert.

"Beyond that Iran is working on other ideas: threats (the Iranian authorities said that any attempt to capture part of their market share on the world oil market would be considered as a treason against the Iranian nation - a clear reference to Saudi Arabia), contacts with Asian countries such as China and India to see if they can buy more Iranian oil, negotiations with the European Union in order to save the Vienna agreement on Iran's nuclear program (which means that Iran would go on respecting its commitments and that the EU should put on the table various options and mechanisms in order for Tehran to be able to be economically rewarded for this good behavior), studies on the possibilities to repatriate oil revenues after the implementation date for US sanctions on the energy sector (November 4) and the development of the refining sector in order for Iran to avoid imports of gasoline," noted Perrin.

He pointed out that so far Iran did not get very material results from these various options and the clock is running until the beginning of November.

"It seems thus obvious that Iran's oil exports and production will fall by the end of this year and in 2019. The key question is: by how much?"

US President Donald Trump announced on May 8 that Washington was walking away from Iran’s nuclear agreement, known as the Joint Comprehensive Plan of Action (JCPOA), which was reached between Iran and the five permanent members of the UN Security Council - the United States, Britain, France, Russia and China - plus Germany.

Trump also said he would reinstate US nuclear sanctions on Iran and impose "the highest level" of economic bans on the Islamic Republic.

Since the US withdrawal from the nuclear deal, European countries have been scrambling to ensure that Iran gets enough economic benefits to persuade it to stay in the deal. The remaining parties have vowed to stay in the accord.